Sections 409A and 457

Name: Sections 409A and 457 | Answers to 300 Frequently Asked Questions, Fourth Edition
Brand: American Bar Association
Price: 157.99 EUR
Availability: OnlineOnly

Answers to 300 Frequently Asked Questions, Fourth Edition

Brian Berglund Louis Ray Richey(Autor*in)

American Bar Association (Verlag)

Erschienen am 2. Mai 2022

351 Seiten

E-Book

ePUB mit Adobe-DRM

Systemvoraussetzungen

978-1-64105-975-6 (ISBN)

157,99 €inkl. 7% MwSt.

Systemvoraussetzungen

für ePUB mit Adobe-DRM

E-Book Einzellizenz

Als Download verfügbar

Beschreibung

Weitere Details

Weitere Ausgaben

Personen

Mr. Berglund is a partner in the St. Louis, Missouri, office of Bryan Cave LLP, an international law firm. Mr. Berglund has spent his entire legal career with Bryan Cave, encompassing almost 30 years. He is a member of the firm's Employee Benefits and Executive Compensation Group and its Tax Advice and Controversy Group. He primarily represents large employers with sophisticated plans. He routinely counsels clients on tax law (especially regarding Code Section 409A), ERISA, securities law, and other issues relating to the design and structure of most types of executive and employee benefit plans. These include appropriate structures for employment agreements, severance plans, stock options plans, nonqualified deferred compensation plans, qualified plans, cafeteria and fringe benefit, and other welfare benefit plans. Mr. Berglund is listed in The Best Lawyers in America and Missouri/Kansas Super Lawyers. He is a fellow in the American College of Employee Benefits Counsel. Mr. Berglund graduated magna cum laude and Phi Beta Kappa with a degree in mathematics from Carleton College in Minnesota and graduated Order of the Coif from the Washington University School of Law in St. Louis. He was an adjunct professor of law at the Washington University School of Law for five years, where he taught a course in the graduate tax program titled Advanced Topics in Employee Benefits." He has served as president of the Employee Benefits Association of St. Louis, Missouri. Mr. Berglund frequently lectures on executive and employee benefits and tax-related topics to various law and bar groups. He has spoken regularly at American Law Institute-American Bar Association (ALI-ABA) programs, other programs covering executive and employee benefits, and St. Louis and Missouri Bar Association sponsored events. He conducted a lecture titled, Section 409A Corrections Program," at a St. Louis Metropolitan Bar Association event in March 2009. Mr. Berglund has written several articles, which have appeared in a number of ALI-ABA program materials, including the Employment Law Journal, Corporate Law Counselor, and St. Louis Bar Association Journal. His article titled, Correcting 409A Violations to Minimize Deferred Compensation Taxes," appeared in the St. Louis Bar Association Journal , Winter 2009 edition.

Inhalt

Intro
Title Page
Copyright
Contents
About the Authors
Notes on Citations
Introduction
Plans Subject to Sections 409A and 457
Q.1 What types of compensation and benefit plans are subject to Section 409A?
Q.2 What plans are not subject to Section 409A?
Q.3 What constitutes a deferral of compensation for purposes of Section 409A?
Q.4 When is it determined whether a plan is subject to Section 409A?
Q.5 When is a plan legally binding for purposes of Section 409A?
Q.6 Who is the service recipient for purposes of Section 409A?
Q.7 Who is a service provider for purposes of Section 409A?
Q.8 If a business engages an individual to write a book, song, software program, or similar item, and the parties agree that the business will acquire ownership of or distribution rights to the property produced in exchange for a monetary payment, does Section 409A apply to the arrangement?
Q.9 Are compensation and benefit plans of tax-exempt organizations subject to Section 409A?
Q.10 Are arrangements involving partnerships subject to Section 409A?
Q.11 What constitutes disability pay exempt from Section 409A?
Q.12 What constitutes a bona fide death benefit plan exempt from Section 409A?
Q.13 What constitutes a bona fide vacation or leave plan?
Q.14 What are the general Requirements for nonqualified deferred compensation plans subject to Section 409A?
Documentation Requirements
Q.15 Are plans subject to Section 409A required to be in writing?
Q.16 When must a plan subject to Section 409A be documented?
Q.17 Are there specific features prohibited in plans subject to Section 409A that were frequently included in nonqualified plans before enactment of Section 409A?
Q.18 Is it appropriate to document the provisions of a plan designed to fall outside the scope of Section 409A?
Q.19 What are the minimum documentation requirements for a plan subject to Section 409A?
Short-Term Deferrals Exempt from Section 409A
Q.20 Do amounts that are paid shortly after they are earned constitute deferred compensation subject to Section 409A?
Q.21 What is the short-term deferral rule?
Q.22 When is payment considered to have been made for purposes of the short-term deferral rule?
Q.23 What situations justify delay in payment of compensation designed to qualify as a short-term deferral beyond 2½ months after the end of the taxable year in which the compensation is earned?
Q.24 What is a substantial risk of forfeiture, and how does it relate to satisfaction of the short-term deferral rule for purposes of Section 409A?
Q.25 If a compensation arrangement qualifies as a short-term deferral exempt from Section 409A, can the parties change the form and time of payment under the arrangement after the services relating to the compensation have been performed without becoming subject to Section 409A?
Q.26 What is the relationship between the definitions of substantial risk of forfeiture under Section 409A, Section 83, and Section 457(f)?
Q.27 What is a vest and pay lump sum SERP?
Distribution Events under Section 409A
Q.28 What are the primary permissible distribution events for purposes of Section 409A?
Q.29 What type of separation from service qualifies as a permissible distribution event for an employee under Section 409A?
Q.30 Will a service provider experience a separation from service if he or she goes on a leave of absence?
Q.31 Will a service provider experience a separation from service in connection with an asset sale?
Q.32 Will a spin-off or stock sale of a subsidiary cause the affected employees to experience a separation from service?
Q.33 May a transaction that is treated as a deemed asset sale under Section 338 be treated as an asset sale for purposes of the special separation from service rules described in Q.31?
Q.34 What constitutes a separation from service of an independent contractor for purposes of Section 409A?
Q.35 How is a separation of service defined when a service provider performs services for a service recipient both as an employee and independent contractor?
Q.36 Must a plan governed by Section 409A that is maintained by a publicly traded company require delayed payments to some plan participants, called "specified employees," even though there is a valid separation from service?
Q.37 Who are "specified employees" of a publicly traded company, its subsidiaries, and its affiliates, for purposes of the six-month delay rule?
Q.38 Can a nonemployee director constitute a specified employee of a service recipient as a result of the director's ownership interest in the service recipient?
Q.39 How are specified employees identified following a corporate transaction involving two public companies?
Q.40 How are specified employees identified following a transaction involving a public company and a nonpublic company?
Q.41 How are specified employees identified following a spin-off?
Q.42 How are specified employees identified following an initial public offering?
Q.43 Are there alternative rules for identifying specified employees following a corporate transaction?
Q.44 Is it possible to comply with the requirement that payments to specified employees on account of separation from service must be delayed for six months after separation by requiring that payments to all service providers on account of separation from service be delayed for six months after separation?
Q.45 Could a specified employee have a claim for post-employment discrimination or retaliation against a service recipient for complying with the six-month delay requirement under Section 409A?
Q.46 What is the definition of disability for purposes of Section 409A?
Q.47 Can a plan's form and time of payment on account of disability be different from the plan's form and time of payment on account of separation from service?
Q.48 Once a distribution event that entitles a plan participant to receive payment occurs, when must the payment be made?
Payments
Q.49 When is a payment considered to have been made?
Q.50 Is the transfer of property that is subject to a substantial risk of forfeiture considered a payment under Section 409A?
Q.51 If a payment is to be made upon death, when must the payment be made?
Q.52 If a payment is to be made upon death, may the beneficiary select the year of payment?
Q.53 If the plan document specifies a more restrictive period for payment of death benefits than is permitted under the rules described in Q.51, may the plan be amended to expand the period for payment of death benefits?
Q.54 Must the plan document specify the period during which death benefits may be paid?
Q.55 Do the rules applicable to payments upon the death of a participant apply upon the death of a beneficiary?
Q.56 Can the time of payment depend on the time the service provider executes a release?
Q.57 Can a plan provide that distribution occurs on the earliest of two or more permissible events?
Q.58 What is the anti-toggling rule and how is it applied?
Q.59 Can a plan provide for different forms of payment depending on whether the service provider is married or not when payment begins?
Q.60 Can a plan provide that distribution occurs on the earlier of a narrowly defined involuntary separation from service and another permissible distribution event?
Q.61 Are there any situations in which a late payment will be excused because of administrative impracticability?
Q.62 Are there any situations in which a late payment will be excused because of financial difficulties of the service recipient?
Q.63 What constitutes a downturn in the financial health of a service recipient?
Q.64 May a service recipient delay making a payment to avoid violating a law?
Q.65 May payment be delayed to avoid the loss of a deduction under I.R.C. § 162(m)?
Q.66 Can a plan provide that the form of distribution is based on the value of the service provider's benefit at the time distribution commences?
Q.67 If distribution of deferred compensation is scheduled to be made in cash, can the service recipient and service provider agree after the services related to the deferred compensation have been performed that distribution will instead be made in the form of restricted stock?
Q.68 May a distribution of deferred compensation be made in the form of a stock option?
Q.69 May a service provider and service recipient agree to cancel a deferred compensation arrangement and replace it with a split-dollar arrangement?
Q.70 Can distributions scheduled on account of separation from service under a deferred compensation plan subject to Section 409A be suspended if the employee is rehired and resumes eligibility under the plan?
Q.71 Does a 409A violation always occur if the service recipient refuses or inadvertently fails to make a payment of deferred compensation when due?
Acceleration of Benefits
Q.72 May deferred compensation distributions be accelerated?
Q.73 What is an unforeseeable emergency for purposes of Section 409A?
Q.74 When can a plan be amended to provide for acceleration of distribution incident to unforeseeable emergency, death, or disability?
Q.75 If a designated beneficiary has become entitled to payments upon the death of the participant, are there any situations in which the payments due to the beneficiary may be accelerated?
Q.76 May a service provider who has elected to receive benefits in the form of a periodic benefit measured by joint life expectancies change beneficiaries without causing an acceleration of benefits?
Q.77 May benefits be accelerated to comply with conflict of interest or foreign ethics laws?
Q.78 What constitutes a cash-out that can be accelerated and paid in a lump sum without violating Section 409A?
Q.79 May a cash-out of small benefits be conditioned on the election or consent of the service provider?
Q.80 May a plan provide that installment or annuity payments will be cashed out in a single sum if the present value of the service provider's remaining benefit falls below a specified level set forth in the plan?
Q.81 May a plan provide for a distribution of benefits upon a change of control?
Q.82 How is a change in ownership or effective control defined for purposes of Section 409A?
Q.83 What are the requirements for enforceability of a domestic relations order directing acceleration of distribution of amounts deferred by a participant under a plan governed by Section 409A?
Q.84 Is a deferred compensation plan subject to Section 409A required to accelerate distribution of amounts deferred by a participant or to divide the participant's account in favor of the adverse party named in a domestic relations order that satisfies the requirements for enforceability under Section 409A?
Q.85 In what circumstances may an employer terminate or liquidate a plan that is subject to Section 409A?
Q.86 Can an existing plan without a provision for termination be amended to provide for plan termination?
Q.87 Can a service recipient voluntarily terminate a plan with respect to one or more, but not all, service recipients participating in the plan?
Q.88 Must a specified employee of a public company wait at least six months to receive distribution due upon a plan termination?
Q.89 Does acceleration of vesting of deferred compensation alone cause a problem under Section 409A?
Q.90 What is the substitution rule?
Q.91 May a service provider borrow money from his or her nonqualified plan or pledge nonqualified plan benefits as security for a loan or other amount due creditors?
Q.92 Does Section 409A prohibit forfeiture, reduction, or voluntary relinquishment of deferred compensation?
Q.93 Does Section 409A permit offset of the amount due the service provider on distribution by the amount the service provider owes the service recipient?
Q.94 Does Section 409A permit offsets of deferred compensation to comply with federal debt collection laws?
Q.95 May deferred compensation be reduced to reflect required tax withholding amounts relating to such deferred compensation?
Q.96 May payment of deferred compensation be accelerated if the plan violates the requirements of Section 409A?
Q.97 May payment of deferred compensation be accelerated to prevent a nonallocation year under I.R.C. Section 409(p)?
Q.98 May payment of deferred compensation be accelerated pursuant to the settlement of a dispute regarding the service provider's entitlement to receive such deferred compensation?
Q.99 Is an election change under a cafeteria plan that results in an acceleration of deferred compensation problematic?
Q.100 If a service recipient determines that a service provider who is a member of a top hat plan is no longer a member of a select group of management or highly compensated employees, may the service recipient cancel the service provider's deferral elections and immediately distribute his or her plan benefits?
Tax Consequences
Q.101 What constitutes a violation of Section 409A that causes a service provider to incur tax liability under Section 409A?
Q.102 What is the general federal income tax scheme for plans subject to Section 409A?
Q.103 What are the federal income tax consequences of a breach of Section 409A?
Q.104 Are there situations in which a substantial risk of forfeiture will be disregarded for purposes of determining whether an amount is includible in income under Q.103?
Q.105 Who is responsible for payment of the taxes imposed on account of a breach of Section 409A?
Q.106 Is an employer required to indemnify plan participants against the taxes imposed by Section 409A if the related violation of Section 409A is due to the employer's own action or inaction?
Q.107 What is the aggregation rule, and how does it apply to determine federal income tax liability on account of a violation of Section 409A?
Q.108 Do the plan aggregation rules apply for other purposes under Section 409A?
Q.109 What is a documentary violation of Section 409A?
Q.110 What is the effect of a documentary violation of Section 409A?
Q.111 What is an operational violation of Section 409A?
Q.112 What is the effect of an operational violation of Section 409A?
Q.113 If a plan fails to comply with Section 409A in one year but deferrals continue under the plan in subsequent years during which the plan otherwise fully complies with Section 409A both in form and operation, does the 409A failure adversely impact the subsequent deferrals?
Q.114 Does Section 409A replace all prior law governing federal income taxation of unfunded deferred compensation arrangements?
Q.115 Have any states imposed a personal income tax that parallels Section 409A?
Q.116 Can the negative income tax consequences of a breach of Section 409A be mediated?
Deferred Compensation Plans Subject to 409A
Q.117 How are participant account balance plans treated for purposes of Section 409A?
Q.118 How are employer account balance plans treated for purposes of Section 409A?
Q.119 How are employer non-account balance plans treated for purposes of Section 409A?
Service Provider Elections
Q.120 What types of service provider elections are typically provided for under deferred compensation plans subject to Section 409A?
Q.121 When must initial elections to defer and to designate the time and form of payment be made under Section 409A?
Q.122 Must the method for calculating installment payments under a nonqualified plan be specified in writing at the time of an initial deferral elections?
Q.123 Which year's deferral election applies to base pay earned during the final payroll period of one year and paid on the first pay date of the next year in accordance with the service recipient's standard payroll practice?
Q.124 How is performance-based compensation defined for purposes of Section 409A?
Q.125 Is a bonus deferral election that is subject to Section 409A cancelled if the service provider separates from service after the election is made or becomes final, but before the date the bonus amount is credited to the service provider's account?
Q.126 Does a service provider's ability to elect that compensation earned in a nine- or ten-month period, typically an academic year, be paid over a twelve-month period spanning two taxable years create nonqualified deferred compensation subject to Section 409A?
Q.127 Can a participant make a subsequent election to change the time or form of payment specified in an earlier election?
Q.128 May a participant revoke a subsequent election to change the time or form of payment specified in an earlier election?
Q.129 If a plan does not include a provision permitting a participant to make a subsequent election to change the time or form of payment specified in an earlier election, may the plan be amended to add such a provision?
Q.130 Is a change of form of payment from one type of annuity to another actuarially equivalent annuity commencing at the same time subject to the requirements that apply to subsequent elections?
Q.131 May a service recipient amend a plan to change actuarial assumptions applicable to annuity payment forms available under the plan without triggering the subsequent election rules or otherwise violating Section 409A?
Q.132 Can a participant make a subsequent election to defer only a portion of an amount previously deferred?
Q.133 Can a participant make a subsequent election to defer periodic installments after distribution has begun?
Q.134 Can a participant make a subsequent election to change the form of payment from periodic installments to a single sum?
Q.135 Can a participant cancel an election to defer compensation during the plan year in which the compensation would otherwise have been paid in the absence of the election?
Q.136 Can a plan permit a service provider to elect multiple forms of payment with respect to various portions of a deferred amount?
Q.137 If a service provider is allowed to elect different deferral percentages for different types of compensation during a year, such as base pay, annual bonus and long-term bonus, will a Section 409A violation occur if the mix of the service provider's compensation changes mid-year?
Q.138 Can the subsequent election rule be used to increase participant flexibility in a plan with multiple annual election options?
Q.139 Can the subsequent election rule and the single or multiple payment election be used in combination to increase the security of benefits accrued under a participant individual account plan benefit?
Q.140 What is a rolling risk of forfeiture and how do the 409A rules apply to a rolling risk of forfeiture?
Q.141 How is the term "materially greater" defined for purposes of Section 409A in the context of rolling risks of forfeiture?
Severance Plans
Q.142 What severance payments are exempt from Section 409A?
Q.143 May the severance plan exemption apply to service providers whose employment begins and ends in the same year?
Q.144 Must the design of a severance pay program use only the short-term deferral rule or only the severance plan rules, or can the two rules be used in combination?
Q.145 Is there any other exemption that could apply to severance payments under Section 409A?
Q.146 Can severance amounts payable on account of voluntary termination or termination for good reason qualify as severance pay or short-term deferrals for purposes of Section 409A?
Q.147 When is termination for good reason considered equivalent to involuntary severance?
Q.148 If a severance arrangement is exempt from Section 409A, can the parties modify the form and time of payment under the arrangement without making the arrangement subject to Section 409A?
Q.149 Is a mitigation provision permitted in a severance agreement that is subject to Section 409A?
Q.150 If all payments due under a severance arrangement do not meet the short-term deferral exception, the separation pay exception, or the small distribution exception, does the arrangement violate Section 409A?
Q.151 Can severance payments substitute for nonqualified deferred compensation payments that are being forfeited?
Q.152 What is a window program for purposes of the severance pay exception to Section 409A?
Q.153 Do collectively bargained severance plans and foreign severance plans required by local law get special treatment?
Stock-Based Compensation
Q.154 Does Section 409A apply to incentive stock options or to options issued under a statutory employee stock purchase plan?
Q.155 Does Section 409A apply to nonstatutory stock options and stock appreciation rights (SARs)?
Q.156 How are a service provider's rights to receive nonvested stock on the exercise of a stock right and to pay the exercise price with previously acquired shares treated under Section 409A?
Q.157 What constitutes service recipient stock for purposes of the stock-based compensation exception to Section 409A?
Q.158 May a service recipient grant stock rights to an individual before the individual becomes a service provider and still have the underlying stock qualify as service recipient stock?
Q.159 Can stock that is subject to a mandatory repurchase obligation upon a service recipient's termination for cause or violation of a restrictive covenant qualify as service recipient stock?
Q.160 How is fair market value of service recipient stock calculated for purposes of determining the exercise price of an option or SAR?
Q.161 What is the relationship between Section 409A and ASC 718?
Q.162 Can the exercise period be extended or the option or SAR modified without causing loss of the exception from Section 409A coverage?
Q.163 How can a nonqualified stock option or SAR become subject to Section 409A?
Q.164 If a nonqualified stock option or SAR is intended to be exempt from Section 409A, may the option or SAR include dividend equivalent rights which are contingent upon exercise?
Q.165 If a nonqualified stock option or SAR is intended to be exempt from Section 409A, may the option or SAR include dividend equivalent rights that expire upon exercise?
Q.166 If a nonqualified stock option or SAR is intended to be exempt from Section 409A, may the option or SAR be adjusted to reflect a stock split or stock dividend?
Q.167 How can a nonqualified stock option or SAR be structured to comply with Section 409A?
Q.168 Does Section 409A apply to restricted stock, restricted stock units, or phantom stock units?
Q.169 Is a deferred compensation plan subject to Section 409A required to specify a valuation date for restricted stock units granted under the plan?
Q.170 Can dividend-equivalent distributions on phantom or restricted stock units qualify as current compensation or short-term deferrals?
Q.171 What are transaction-based compensation payments?
Q.172 What special payment rules apply to transaction-based compensation?
Q.173 How do the transaction-based compensation rules apply to stock options or stock appreciation rights that were exempt from Section 409A when issued?
Employment Agreements
Q.174 Which common provisions of an employment agreement might create issues under Section 409A?
Q.175 What issues do fringe benefit arrangements pose under Section 409A?
Q.176 If a former highly paid service provider is allowed to continue self-insured medical coverage for life by paying the full cost of coverage, is the arrangement subject to Section 409A?
Q.177 Is a provision in an employment agreement for a tax gross-up payment, such as to compensate an executive for golden parachute taxes, permitted under Section 409A?
Q.178 Are payments made pursuant to a settlement with an employer, payments made under indemnification agreements, or payments made to acquire directors' and officers' insurance treated as nonqualified deferred compensation subject to Section 409A?
Q.179 Are payments of employment-related legal fees and expenses deferred compensation subject to Section 409A?
Split-Dollar and Other Life Insurance Arrangements
Q.180 Which split-dollar life insurance arrangements are subject to or exempt from Section 409A coverage?
Q.181 Are split-dollar life insurance programs subject to grandfathering under Section 409A?
Q.182 What is a bonus life insurance or annuity plan, and how can it be used as a substitute for a nonqualified deferred compensation plan subject to Section 409A?
Q.183 Is a key person life insurance policy owned by the service recipient subject to Section 409A?
Q.184 Are other life insurance plans subject to Section 409A?
Q.185 Could Section 409A apply in connection with termination of a split-dollar life insurance arrangement that is generally exempt from Section 409A?
Foreign Plans
Q.186 Does Section 409A apply to deferred compensation attributable to services rendered outside the United States?
Q.187 What are the requirements for the treaty exemption from Section 409A?
Q.188 What are the requirements for exemption from Section 409A for amounts subject to tax equalization agreements?
Q.189 What are the requirements for exemption from Section 409A for foreign social security arrangements?
Q.190 What are the requirements for exemption from Section 409A for broad-based foreign retirement plans?
Q.191 Can foreign earned income be subject to exemption from Section 409A under the generally applicable rules?
Q.192 How does Section 457A compare to Section 409A?
Q.193 If a plan is subject to Section 457A, may it also be subject to Section 409A?
Limitations on Linking Plans
Q.194 Can participant elections under a nonqualified deferred compensation plan that is an excess plan be linked to and controlled by a qualified retirement plan?
Q.195 Can the benefits from one nonqualified plan be offset against the benefits of another nonqualified plan?
Funding
Q.196 Is a plan subject to Section 409A required to be funded?
Q.197 Does Section 409A permit assets in a rabbi trust or other trust to be applied exclusively to fund a nonqualified deferred compensation plan incident to a change in the employer's financial condition?
Q.198 May an employer use an offshore trust to hold assets acquired in connection with a nonqualified deferred compensation plan covered by Section 409A?
Q.199 May a nonqualified deferred compensation plan be informally funded through a rabbi trust while the plan sponsor maintains an underfunded tax-qualified defined benefit retirement plan?
Q.200 Do the Section 409A funding restrictions apply to grandfathered plans?
Pandemics and Other Crises That Disrupt the Economy
Q.201 What issues and concerns arose during the Covid-19 pandemic as a result of restrictions imposed by Section 409A?
Q.202 What legislative or regulatory relief was issued to address the Section 409A challenges that arose during the Covid-19 pandemic?
Q.203 May a service provider access his or her nonqualified plan benefits due to a pandemic?
Q.204 Under what circumstances may a service provider access nonqualified plan benefits during a pandemic due to unforeseeable emergency, and how do these circumstances differ from those applicable to hardship withdrawals from 401(k) plans?
Q.205 Under what circumstances may a service provider access nonqualified plan benefits during a pandemic due to disability?
Q.206 Under what circumstances may a service provider be provided access to nonqualified plan benefits during a pandemic due to plan termination?
Q.207 May a service provider modify or cancel his or her nonqualified plan deferral election as a result of a pandemic?
Q.208 If a service recipient reduces a service provider's regular compensation during a pandemic, does the service provider have the option of cancelling his or her nonqualified deferral election?
Q.209 If a service recipient reduces a service provider's compensation during a pandemic, may the service recipient promise to pay the compensation reduction to the service provider in the future?
Q.210 If a service recipient reduces a service provider's bonus opportunity during a pandemic, does the service provider have the option of modifying or cancelling his or her bonus deferral election if the bonus is not performance based?
Q.211 If a service recipient reduces or otherwise modifies a service provider's opportunity to earn a performance-based bonus during a pandemic, does the service provider still have the option of making a delayed election in accordance with the performance-based bonus rules?
Q.212 If a service recipient reduces or otherwise modifies a service provider's opportunity to earn a performance-based bonus more than six months into the performance period due to a pandemic, what impact does this have on a service provider's delayed election pursuant to the performance-based bonus rules?
Q.213 What impact does a temporary shutdown of all business operations during a pandemic have on service provider deferrals under a nonqualified plan?
Q.214 May a service recipient reduce or cancel matching or other employer credits to a nonqualified plan during a pandemic without violating Section 409A?
Q.215 To help preserve cash flow during a pandemic, may a service recipient reduce or cancel asset contributions to a rabbi trust used to informally track the liabilities of a plan without violating Section 409A?
Q.216 If a service recipient furloughs service providers during a pandemic, does a separation from service occur for purposes of Section 409A?
Q.217 If a service provider takes a leave of absence during a pandemic, does a separation from service occur for purposes of Section 409A?
Enforcement
Q.218 Can an employer obtain an IRS letter ruling that a deferred compensation plan satisfies the requirements of Section 409A?
Q.219 Are there any issues involving deferred compensation plans subject to Section 409A on which the IRS will issue rulings?
Q.220 When will the IRS actively audit and enforce the requirements of Section 409A with respect to covered plans?
Q.221 Does the service recipient have income tax reporting obligations with respect to amounts accrued by service providers under its deferred compensation plans that are subject to Section 409A?
Q.222 What penalties may be imposed on a service recipient when a Section 409A violation occurs?
Q.223 In determining compliance with the various timing requirements in the Section 409A rules, how does the IRS count days, months, and years?
Mitigation-Documentary Errors
Q.224 Are there ways to limit the negative tax consequences of documentary errors under Section 409A?
Q.225 What types of documentary errors are subject to correction under Notice 2010-6?
Q.226 What types of plans are not eligible for correction of documentary errors under Notice 2010-6?
Q.227 What documentary ambiguities in a plan can be addressed by interpreting the ambiguous provision consistent with Section 409A without having to amend the plan?
Q.228 What types of errors in plan documentation can be corrected by plan amendment without recognition of income by a service provider?
Q.229 What types of documentary errors can be corrected by plan amendment with limited recognition of income for service providers who were subject to the documentary error before the corrective amendment?
Q.230 What type of documentary errors can be corrected by plan amendment with recognition of Section 409A income by affected service providers without exception?
Q.231 What special rules apply to stock plans?
Q.232 In what circumstances can a documentary error relating to a stock right intended to be exempt from Section 409A be corrected?
Q.233 What special rules apply to linked plans?
Q.234 When is correction deemed to occur for purposes of Notice 2010-6?
Q.235 What are the rules for recognition of service provider income incident to a documentary correction pursuant to Notice 2010-6?
Q.236 What additional reporting and disclosure requirements are imposed in connection with correction of a documentary error that requires a plan amendment?
Q.237 Can a documentary error in a new plan be corrected by plan amendment without being subject to the tax and reporting requirements generally required?
Q.238 What correction is available in the event of a scrivener's error?
Q.239 Are there any circumstances in which a documentary error in a plan subject to Section 409A can be corrected without complying with Notice 2010-6?
Mitigation of Consequences-Operational Errors
Q.240 Has the IRS published guidance on correction of inadvertent errors in the administration of deferred compensation plans subject to Section 409A?
Q.241 Is there a minimal level of administrative error under Section 409A for which the IRS does not require formal correction and reporting?
Q.242 Are there any plans for which the correction of operational defects pursuant to Notice 2008-113 does not apply?
Q.243 What analysis should be done to determine whether correction of an operational error pursuant to Notice 2008-113 is necessary?
Q.244 What correction is available for failure to defer compensation pursuant to the plan, the service provider's deferral election, and Section 409A?
Q.245 What correction is available for late distribution of previously deferred compensation?
Q.246 What correction is available in the case of otherwise proper payment of amounts due a specified employee upon separation from service during the six months following the separation?
Q.247 What correction is available if the amount deferred on behalf of a service provider under the plan is greater than provided for in the plan or the service provider's deferral election?
Q.248 What correction is available for payment of deferred compensation before the calendar year it is scheduled to be paid?
Q.249 What correction is available if distribution occurs in the correct calendar year but earlier than the scheduled distribution date?
Q.250 What correction is available for erroneously establishing the exercise price of a stock right below fair market value of the underlying stock on the date of grant?
Q.251 What is the limitation on elective deferrals under Section 402(g)(1)(B) of the Code?
Q.252 Who is an insider under Notice 2008-113?
Q.253 If the term "officer" is determined by reference to the Section 16 rules identifying who is an "insider" for 409A correction purposes, which individuals would be considered officers?
Q.254 If earnings or losses are to be credited in connection with an applicable correction, but it is administratively impracticable to make the adjustment for earnings or losses by the deadline for corrections set forth in Notice 2008-113, is any relief available?
Q.255 What are the additional reporting and disclosure requirements regarding corrections pursuant to Notice 2008-113?
Mitigation-Disqualification by IRS Examination
Q.256 When is a service recipient considered to be under IRS examination for purposes of the documentary and operational correction programs?
Q.257 When is a service provider considered to be under IRS examination for purposes of the documentary and operational corrections programs?
Q.258 How should a service recipient that uses a correction procedure address the audit status of its affected service providers?
Q.259 When will a correction be considered complete for purposes of determining whether the service provider or service recipient is under IRS examination at the time of correction?
Q.260 What should a taxpayer do if the IRS audits the taxpayer's return for a year in which a correction after the year of error occurred?
Q.261 Will participation in a correction program increase a taxpayer's audit risk?
Q.262 If an operational failure is corrected under the principles described in Notice 2008-113 and a substantially similar operational failure subsequently occurs, can the subsequent failure be corrected by applying these principles again?
Q.263 Why doesn't the IRS offer a Section 409A correction program like the Employee Plans Compliance Resolution System (EPCRS) for tax-qualified retirement plans?
Q.264 What options are available if a 409A failure is discovered when correction is no longer available under the IRS correction guidance?
Q.265 What is the statute of limitations for breach of Section 409A?
Q.266 How do statute of limitations principles apply in the context of 409A violations?
Q.267 May a service recipient take the position that the assessment of 409A tax liabilities is time-barred when such liabilities arise from a failure to timely distribute nonqualified deferred compensation in a closed tax year?
Q.268 If a service provider fails to properly include amounts in income arising from a Section 409A failure, and assessment of taxes becomes barred by the statute of limitations, can the taxpayer claim that such amounts can never be taxed?
Effective Dates
Q.269 What was the statutory effective date of Section 409A?
Q.270 When is a grandfathered plan considered to have been materially modified?
Q.271 Can a grandfathered plan be amended to permit addition of a life insurance contract for notional investment crediting purposes without causing the plan to lose grandfathered status?
Q.272 If a grandfathered plan is amended to change the form and time of payments under the plan, will such a material modification result in a violation of Section 409A?
Q.273 How are amounts eligible for grandfathering determined?
Q.274 Are grandfathered amounts subject to any restrictions on distribution?
Q.275 What was the effective date for actual compliance with Section 409A?
Q.276 What were the standards for compliance with Section 409A for the transition period between the statutory effective date, January 1, 2005, and December 31, 2008?
Q.277 Has Congress ever introduced legislation to repeal Section 409A?
Plans of Tax-exempt Entities
Q.278 What regulatory guidance has been issued with respect to deferred compensation plans of tax-exempt and governmental entities, and when is the regulatory guidance effective?
Q.279 What are the general tax rules governing nonqualified deferred compensation arrangements of tax-exempt entities?
Q.280 Why are the rules associated with the taxation of deferred compensation for tax-exempt entities different from the rules applicable to taxable employers?
Q.281 What is the definition of deferred compensation in the tax-exempt employer context?
Q.282 If a plan is subject to Section 457, may it also be subject to Section 409A?
Q.283 What plans are treated as not providing for a deferral of compensation for purposes of Section 457?
Q.284 When is a plan legally binding for purposes of Section 457?
Q.285 What is a bona fide severance pay plan for purposes of Section 457?
Q.286 How does the definition of "bona fide severance pay plan" differ for purposes of Sections 409A and 457?
Q.287 What constitutes a bona fide death benefit plan exempt from Section 457?
Q.288 What is a bona fide disability pay plan for purposes of Section 457?
Q.289 What is a bona fide sick and vacation leave plan?
Q.290 What is the short-term deferral rule in the context of Section 457?
Q.291 How does the definition of "substantial risk of forfeiture" differ for purposes of Sections 409A and 457?
Q.292 What is recurring part-year compensation?
Q.293 May an employee of a tax-exempt organization elect to defer salary or other vested compensation subject to a substantial risk of forfeiture and thereby achieve deferral of income taxation under Section 457?
Q.294 May an employee of a tax-exempt employer achieve a deferral of income taxation of an amount subject to a substantial risk of forfeiture by extending the substantial risk of forfeiture to a future date?
Q.295 How do the rules under Section 457 relating to rolling risks of forfeiture differ from the Section 409A rules?
Q.296 If an amount is includable in income under Section 457(f) before payment of the deferred amount is made, how is the taxable amount of compensation determined?
Q.297 How is the present value of compensation deferred under an account balance plan determined for purposes of Section 457?
Q.298 How is the present value of deferred compensation under a plan that is not an account balance plan determined?
Q.299 If an amount is includable in income under Section 457 before payment is made, how are earnings accruing after the date of income inclusion treated?
Q.300 If an amount is includable in income under Section 457(f) before payment is made, may benefits under the plan be reduced to pay required tax withholdings?
Appendix A Checklist for Structuring Nonqualified Deferred Compensation and Benefits
Appendix B Checklist for Drafting Plans Subject to Section 409A
Appendix C Unforeseeable Emergency Distribution Request Form
Appendix D Domestic Relations Order
Appendix E Checklist for Permissible Distributions and Accelerations
Appendix F Correction of Documentary Failures Sample Statements
Appendix G Correction of Operational Failures Sample Statements
Appendix H Super Summary For Correction of Operational Violation of Section 409A
Table of Authorities
Index
Back Cover

Systemvoraussetzungen

Als PDF speichern Als Link merken